Users can now block instances. Similar to community blocks, it means that any posts from communities which are hosted on that instance are hidden. However the block doesn’t affect users from the blocked instance, their posts and comments can still be seen normally in other communities.

So yes but not exactly. It's not as effective as you would think that an instance block would be if it doesn't block the users. That's not even addressing the fact that Lemmy's blocking isn't even really blocking it's more along the lines of muting, it's just named blocking.